The rich don’t always get richer.
The 31 wealthiest people in Orange County saw an estimated 10% drop to $33.1 billion in combined wealth in the past year, according to this week’s Business Journal list.
The economic downturn that has hit just about everything,from real estate and stocks to private company valuations,shaved nearly $3 billion from fortunes of those on this year’s list and $4 billion compared to those on last year’s list.
The declines were widespread. Twenty-two entries on the list, or 70%, are estimated to be lower than they were a year earlier. Six are flat. Only three are estimated richer than a year earlier.
It is the second major drop since the Business Journal started its list in 2001. The last and most significant drop came in 2002, when the wealthiest here declined by 14% in the technology downturn.
The declines this year likely are greater than they seem. As a rule, our estimates are conservative and err on the low side, making our list something of a rolling average of wealth here.
During the boom years, we didn’t exponentially raise valuations. Conversely, our figures are moderate on the downside, as we likely undervalued many in the past.
The group now is worth about what we pegged the richest here to be between 2006 and 2007.
Real estate owners led this year’s decline with their second straight year of lower valuations. The eight people who derive all or part of their wealth from real estate saw a 12% drop to $16.5 billion in estimated worth.
The real estate group also was thinner at eight members, down from 10 last year.
Two real estate names from last year’s list didn’t make the $250 million cutoff for this year and now appear on our list of Other Centimillionaires on page 38.
Hadi Makarechian and son Paul Maka-rechian, who ranked a combined No. 14 at an estimated $600 million last year, fell off partly because of lower real estate values but largely because of a re-evaluation.
Based on input from sources, we overestimated the Makarechians’ stakes in the hotels, land and other real estate they’re involved in with San Francisco-based hedge fund manager Farallon Capital Management LLC.
The Makarechians own small stakes in the projects (with some of those stakes having been wiped out in the downturn) and collect fees on development, according to sources.
They’re believed to have made money on housing development, including near the St. Regis Monarch Beach Resort in Dana Point, and on a 2007 refinancing of the hotel that ultimately led to last month’s transfer to lender Citigroup Inc.
The other missing real estate name from 2008 is Henry Segerstrom, who ranked No. 30 last year at an estimated $225 million.
Segerstrom, managing partner of Costa Mesa-based C.J. Segerstrom & Son LLC, is believed to have held up better than others but surely has seen declines in the family company’s real estate.
Even so, he still could be worth $225 million, given our estimate last year was
conservative.
Technology company owners filled the gap as their fortunes fared better.
Three technology newcomers were the only list entries estimated to be worth more than they were a year earlier.
No. 26 Sheldon Razin, founder and chairman of Irvine-based healthcare software maker Quality Systems Inc., debuted at an estimated $300 million, up 9% from a year earlier. Razin owns nearly 20% of Quality Systems, which has seen its shares rise about 30% this year to a recent market value of $1.6 billion.
Two other newcomers have seen an even greater rise. Brothers Mark and Manouch Moshayedi, who tie for No. 29 at an estimated $250 million each, are projected to have more than doubled in wealth in the past year.
Their Santa Ana-based STEC Inc. is surging on a new type of data storage drive that’s gaining business. They own sizable chunks of STEC, which has risen nearly 300% in the past 12 months to a recent market value of $1.7 billion.
In all, the tech group is estimated at $9.7 billion, down 5% from a year earlier.
Real estate owner Donald Bren continues to dominate the list, despite fluctuations.
We estimate Bren, owner and chairman of Irvine Company, at $12 billion, based on a re-evaluation of his holdings and debt that determined our $10.5 billion estimate for him a year ago was too low, even amid an epic real estate downturn.
A year ago, we called our estimate conservative and said aggressive number crunching and input from sources put Bren at $15 billion to $20 billion.
Based on new information this year, it turns out Bren last year could have been easily put in that higher range, even at the high end of that range.
Of course, Bren has seen declines in real estate in the past year. Valuations based on multiples of cash flow are down for all types of commercial real estate.
He still makes up 36% of the wealth on our list, a share that increased with bigger de-clines elsewhere.
